Apple: Designed in California, Rotten to the Core

by Michael Truscello / July 27th, 2013

The new advertisements for Apple computers have a curious but familiar tagline: “Designed by Apple in California.” It’s the kind of motto that draws your attention to two things: one, that the product is “designed” in California, but not “made” there; and two, that Apple is in California, and not somewhere outside of the United States, like, say, South Korea, where Samsung, Apple’s principal competitor, is located.

Sure, the obvious reason for the “in California” part is because Samsung has now doubled Apple’s smartphone market share. “Samsung smartphone shipments… grew 60% year over year compared to Apple’s 6.6%,” according to Forbes. A recent Reuters article points out that Apple is losing market share in China, where its phones are manufactured, with a 43% drop in revenues from the previous quarter, and a 14% drop in revenues since the same quarter last year. While no one should conclude Apple is on the ropes in Greater China—indeed, its quarterly revenues are still over $4.5 billion—the decline may suggest a long term trend in the most populous market on earth, a smartphone market estimated to be worth $117 billion in 2017.

Apparently in response to its sagging fortunes, Apple decided to play the nationalism card, and around the July 4th holiday no less. A possible resurgence of Apple in this market has only fed the ongoing tête-à-tête of commercials from the two tech giants.

The irony of Apple’s “Designed in California” ads is that they foreground the reality that Apple’s products are not “made” in California. Apple’s iPhones are manufactured by the Taiwan-based company Foxconn in Shenzhen, China. Foxconn, of course, became notorious when some of its employees committed suicide, apparently a consequence of miserable working conditions. In response, Foxconn built a net around its factory to capture jumpers. Former Apple CEO Steve Jobs defended Foxconn, saying the factory has “restaurants and movie theatres and hospitals and swimming pools. For a factory, it’s pretty nice.” He also reasoned that the suicide rate at Foxconn, with its 400,000 employees, is better than the suicide rate for the United States.

In the Wall Street Journal, publisher Rich Karlgaard complained that posthumous critics of Jobs’s exploitation of Chinese workers were taking advantage of a dead man. “Now the tyrant is gone,” Karlgaard intoned, “so let’s tear his legacy apart.” While Karlgaard agreed that Apple’s “management secrecy, lack of ethnic and gender diversity, and use of its $100 billion in cash” were fair targets for critics, Apple’s use of Foxconn for manufacturing was not. Karlgaard reiterated Jobs’s line about the 18 Foxconn suicides since 2010 being comparable or better than the U.S. average. Then Karlgaard made the classic capitalist excuse for rampant exploitation of workers: “To pick on the Apple-Foxconn partnership is to argue for perfection in an imperfect world.” Clearly, to ask that no one commit suicide because of working conditions is just being a utopian of the worst kind.

To avoid paying millions in state taxes in California, Apple located a small office in Reno, Nevada. Instead of paying California’s 8.84% corporate tax rate, Apple pays the 0% tax rate in Nevada. As the New York Times reported last year, “As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office — that help cut the taxes it pays around the world.” Apple has managed to locate a whopping 70% of its profits overseas, to places where taxes aren’t so onerous. And Apple was not simply an innocent following the lead of other corporations, to be able to compete with them: “Apple was a pioneer of an accounting technique known as the ‘Double Irish With a Dutch Sandwich,’ which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean. Today, that tactic is used by hundreds of other corporations — some of which directly imitated Apple’s methods, say accountants at those companies.”

For a company so proud to be associated with California, it certainly works hard not to pay taxes there.

Whenever corporations, or the puppet politicians who enable them, play the nationalism card, just remember that global capitalism has no allegiance to nations, geography, or anything else but the owners. If someday Apple should tell us its products are “Designed and manufactured in California, where our workers own the company,” that will be a step in the right direction.

Michael Truscello, Ph.D., is an assistant professor in English and General Education at Mount Royal University in Calgary, Alberta. Read other articles by Michael.